By ALBERT S. WAXMAN, PhD
Healthcare reform has finally made its way through the U.S. political machinery, emerging with a $1 trillion reform plan extending health insurance to 32 million additional Americans and eliminating other barriers to healthcare insurance.
To be sure, it’s a good start: America has finally joined the world’s other developed nations and made healthcare a national requirement for most citizens. However, there is a real risk that we have traded one problem for another.
The healthcare reform law – formally, the Patient Protection and Affordable Care Act (PPACA) – does very little to address the underlying costs and structural issues that have driven healthcare costs to rise at about 2 ½ times the annual rate of inflation. Adding 32 million people to these bad economics will place additional stress on a system that continues to swell. Failure will lead an existing $2.5 trillion industry to inflate to more than $4.5 trillion in 2019, according to The Centers for Medicare and Medicaid Services, and further weaken the U.S. economy.
Transformative change in our healthcare system is required, and this can only be achieved through innovation and the adoption of new ideas. Such a healthcare industrial revolution would go far toward eliminating the 30 percent waste and error characteristic in today’s system and improving U.S. global competitiveness via the creation of new products for export. If created and executed properly, disruptive models of healthcare services and new medical technologies will be the foundation for opportunities to create new businesses based on 21st century technology.
Here are six suggestions to bring about the changes needed:
•An efficient system to prevent and manage chronic illnesses, such as diabetes and hypertension, which account for 78 percent of all healthcare expenses in Medicare. Technology can help improve care management to prevent costly procedures and to incentivize consumers to live healthier lifestyles.
•Error reduction in inpatient, ambulatory, and post-acute care. These errors – a staggering 19 percent error rate in medication administration errors at hospital bedsides alone — are the result of poor information flow and fallible human behavior. Innovative solutions to help care administrators avoid costly and tragic mistakes have begun emerging and have demonstrated positive clinical outcomes.
•Focused technology and services to address and reduce the diabetes epidemic, which costs an estimated $170 billion annually in the U.S. Improved diagnostic solutions and healthcare management programs will go a long way in controlling the spiraling costs.
•New medical technology to enable earlier and better diagnosis and thus earlier intervention to mitigate the impact of high-cost, high-morbidity diseases. Continued innovation around technologies that help identify diseases earlier will have a vital financial and clinical impact.
•Medical devices to foster less invasive and more effective surgical interventions. New minimally invasive surgical technologies will enable care givers and hospitals to provide treatment options that reduce inpatient use and result in fewer negative side effects and better clinical outcomes. A number of these technologies have already been developed and are being used successfully, but much more can be done.
•Lastly, venture capitalists must recognize and sponsor entrepreneurs committed to developing solutions for most of the previously mentioned challenges. Some already are doing this, which is why some of the required technology already exists. But we have a long way to go, especially in healthcare IT, which currently comprises less than 1% of venture capital investment. Venture capitalists must assume a leadership role in spurring the innovation needed to save not just America’s healthcare economy but its overall economy.
Failure to innovate will lead us down the path to a single payer system, which history shows is not a good solution, either. Every nation that has adopted a single-payer approach is experiencing healthcare inflation similar to or greater than what we are contending with in America.
Clearly, the huge and complex problems of healthcare must be attacked on multiple fronts, and the American healthcare economy is clearly a market poised for transformation. The passage of landmark healthcare legislation creates significant impetus to develop and market sound ideas and technologies to improve the health of our healthcare system. I’m optimistic this scenario will evolve because it is fundamentally the story of America’s history – one in which serious problems are solved and the country is renewed through industrial innovation and public/private partnerships that foster growth.
Albert Waxman, PhD, has more than 40 years leadership experience as an entrepreneur and investor in the healthcare economy, fueled by a particular focus on driving down costs, improving quality and aligning incentives across payers, providers and patients. As the CEO and founding partner of Psilos Group, co-headquartered in the Bay Area and New York City, he and his firm have funded and developed more than 38 innovative companies dedicated to this vision, including ActiveHealth, AngioScore, Click4Care, Definity Health, ExtendHealth and OmniGuide.
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Nice idea but how do we pay for these changs if we are not reimbursed by CMS and if we are it is 3 working weeks later at 21% less. How about this aspect to the primary care shortage. Unemployeed doctors. Us old guys are not retiring – can’t afford it. Groups are hiring – can’t afford it. New docs going out of their own – what decade is this and how can they afford it with the loans.
Why does healthcare reform NEVER EVER address the doctor. If healthcare is a right then by extension the person providing that right whose license to provide that right is controlled by the government has lost his or her rights with restraint of trade. Yes? No?
Healthcare reform is vitally necessary. But why were the physciians not asked to participate inthe reform process?
“The typical American diet needs to change. Such change will face opposition from very powerful industries and from the people themselves.”
In 2006 the State of Minnesota tried to ban the use of food stamps to purchase soda pop and candy bars. They were stopped from doing so by the federal government.
We all know Obamacare is going to end very badly indeed, ie with rationing, poorer quality care, hostile customer service, and long waiting lists. If you’ve got money, you’ll buy concierge service and be just fine. If you don’t, good luck!
Make all the lists you want. It’s not going to make a damn bit of difference.
Great ideas! However, people have to start taking responsibilities for their diet and lifestyles. We don’t need the government to have their fingers in the soup (soda tax, salt tax, etc…).
Thanks for tips !
they really dropped the ball when they dropped the public option from the bill. making those insurance companies compete against a real competitor who wasn’t part of their price fixing oligopoly would have changed the game
The only way to deliver comprehensive quality heatlth care to all Americans through private doctors, hospitals, clinics and therapists with low cost drugs is via a single payer, low overhead national health insurance which is allowed to bid on pharmaceuticals and install a single EMR/Billing system to reveal quality of medical and surgical therapeutic and preventative outcomes and thereby allow both doctors, hospitals and pharmaceuticals to compete in a capitalistic free market based on quality of outcomes. All else is a continuation of the current government subsidized private drug and health insurance ponzi scheme operating parallel to and within Medicare Insurance (Medicare, the only health insurance Co in the world forbidden by law to bid on a drug formulary).
Also, we need to immediately strip the exemption for monopolies/anti trust from the private health insurance companies together with the private health insurance companies exemption from medical malpractice lawsuits based on ERISA. Medicare Advantage and Part D subsidies for private companies should be replaced with a single payer formulary which bids on drugs based on clinical outcomes.
Dr. Waxman:
Your comments are on target except for one thing . . . the rising cost of prescription drug use in America alone.
Incentive programs, kickbacks to doctors, prescrition drug manufacturers’ television advertising are all contributing to the unnecessary health care. We could call this a drug cartel legally “built into” the US health care system. I wonder what percent of drugs are inappropriately prescribed by the medical profession. We all need to get to the bottom of this before we become a “zombie” society.
Market forces should not be present in the US health care delivery system of America. Major profits in the industry have doubled health care cost per capita than any other country in the world. Just take a look at how US compares to rest of the world at: http://jewelhealth.wordpress.com/2010/02/21/united-states-health-care-spending/
We need a “fix” for the US Healthcare Delivery System that is truly broken. It is not just about who is going to pay for it.
Nate, you have a special gift of taking everything to the most extreme. No, not everybody should move to the city, but my neighborhood has no sidewalks. The idea was that everybody drives. Everything has a drive through window, so you don’t have to burn even 5 precious calories while getting an oversized big Mac. In most neighborhoods, you have to drive a few miles to the grocery store and a few miles to the playground. That’s just bad planning. I think you understand exactly what I’m trying to say.
As to gyms, it won’t kill a small employer to replace the candy vending machines in the “snack” room with one treadmill and a set of free weights ($2000), and allow folks to take staggered 45 minutes breaks. You put a sign sheet on the door and starting with the boss, everybody signs up. Peer pressure will do the rest. Maybe a big shiny star on the cubicle of the employee that logged the most workout minutes or something. They can have lunch at their desk. Those big (does everything have to be big?) gyms are there now and people never find the time to make a special trip.
Good solutions don’t have to be expensive and complex or perfect. They just have to work reasonably well for a reasonable number of people.
Margalit are you saying everyone should be forced to move to the city? While walking is nice my office is 40 miles away in Ohio. In NV walking anywhere when is it 110 is not very praticle. So everyone should move to the City AND all cities in the SW should be disolved?
“Employers need to be given incentives to provide on-site exercise facilities,”
That sounds terribly inefficient. All but the largest employers would have the equipment sit idle most of the day. Isn’t it better to have a central gym, a large size one with all sorts of choice in equipment, where people from all over town could work out whenever they wanted. Maybe call them something like 24 hour fitness, or curves, or something.
If you did require me as an employer to offer an on site gym would I also be protected from worker comp claims or lawsuits from employees that injure themselves using it?
Curious what part of this actually makes sense? Ins’t the point of a work site to work?
6 cost effective strategies to improve healthcare
@Find a competent doctor.
@Avoid care where CPOE is king.
@If you are subject to a CPOE circus, have a advocate 24/7 questioning all.
@Avoid paraprofessionals with long white coats in the PA and NP doctor act alike gig.
@Obtain second opinions from clinical experts.
@Avoid hospitals where CEO’s earn more than $1 million, because they are skimping on care to meet the compensation.
I agree, America’s health care needs to be reformed! Very informative and interesting ideas.
Margalit, Michael, Shereef I could not agree with you more.
Derek, thanks for the note.
Geek, I am not sure what your point is. Mine is that we can do good things to improve American’s health and the healthcare system and still prosper as a business community. Not sure why that is a negative in our country.
Al
Neither geekdom nor patients will be served by the points you raise. Costs will increase and you will be enriched.
Well stated.. I agree with your “suggestions”. I too believe that these steps can greatly improve the quality of care provided. Thanks for sharing.
Dr. Waxman,
Your list is a convincing and useful summary of the technologies that have a potential to reduce costs and improve health care in America. However, most of your solutions seem to center on earlier intervention for chronic disease, as well as efficiency improvements on the facility level. I do not see these taking hold without fundamental reimbursement reform by way of changes in Medicare fee schedules, which essentially determine the behavior of all other payers. Everything from error reduction in hospitals to managing chronic disease is unlikely to improve in the context of fee-for-service reimbursement, simply because everybody makes more money when patients are treated for being sick. I agree with the first commenter that regulators can alter investment behavior with certain strategies that will improve health care. Let’s extend this by having them change the way doctors and facilities are rewarded for what they do.
Please visit my blog on the business of health care in America:
http://www.shereefelnahal.com
Yes, technology can accomplish great things, but in this case I think much simpler things need to happen.
The typical American diet needs to change. Such change will face opposition from very powerful industries and from the people themselves.
The way we build our communities needs to change. Today we build for car drivers, and we need to build for walking.
Employers need to be given incentives to provide on-site exercise facilities, and employees should be incentivized to use them.
Schools need to mandate physical education classes every single day, all the way through college.
We need to build parks and playgrounds within walking distance from every home.
We need to change our lifestyle and maybe even our basic values, or resign to being kept alive by ever increasing amounts of expensive machines and chemical compounds.
Is anybody interested in investing in these type of ventures?
A self promoting scheme that misses the point: The patient needs a doctor!
Dr Waxman, as you know from your start-up endeavors, the capital markets will most certainly sponsor innovative solutions and specifically IT, if the opportunity can provide an adequate return on capital. The great danger to the more optimistic visions of a healthcare system that is successful in expanded access, improved affordability and the preservation of quality is simply that rationed reimbursement, heavier taxation and cost shifting to bio, pharma, med device and others will lead to an exodus of capital to other industries and opportunities that offer a decent IRR.
The US leads in medical innovation partly because of the rewards for those who invest capital in new technologies and solutions.
The misaligned incentives that have created a system more focused on treating chronic illness than preventing it fortunately still also reward innovation. As the government seeks to reign in costs, it is also going to have to create tax incentives and room for adequate returns for those who seek to invest in solutions that will achieve your vision. The symbiotic relationship of free market capitalism and healthcare must be preserved in some form or your vision will slowly atrophy along with our spend as a percentage of GDP. We may need to allow healthcare costs to rise faster than the rate of inflation ( certainly not at 2 1/2 times as it is today ) but by a margin that allows for investment to be rewarded. Thanks for sharing